ANNUAL REPORT FY 2001

Overview

The national unemployment rate reached 5.4 percent in October 2001, an
increase of 1.5 percentage points over October 2000. A national unemployment
rate of 5.4 percent has not been recorded since December 1996. The terrorist
attacks of September 11 further exacerbated the loss of jobs  with 1,013
mass layoffs involving 117, 711 workers occurring within the following three
weeks.

Declines in the economys performance often precede a significant
increase in the demand for reemployment and retraining services. Each year, an
estimated 2 million displaced workers require reemployment services and 500,000
need retraining to secure jobs with long-term employment potential. For these
workers, the workforce development system serves as a resource to aid them in
developing the skills demanded by technological change and to overcome barriers
to employment, such as basic skills deficiencies and low levels of English
language proficiency.

Serving the Public

The Departments Employment and Training Administration provides
worker retraining through three major programs: the Workforce Investment Act
(WIA), Title IB (Adult and Dislocated Worker Employment and Training
Activities); the Trade Adjustment Assistance (TAA) program; and the North
American Free Trade Agreement Transitional Adjustment Assistance (NAFTA-TAA)
program. The framework for delivering WIA services emphasizes: preventing
unemployment, where possible; maximizing job placement and wage replacement;
early intervention following the notification of a plant closing or loss of
jobs; effective service and outreach; and partnerships with employers,
employees representatives, faith and community based organizations and
other stakeholders. All three of the Departments programs serving
dislocated workers provide occupational and on-the-job training, job search
assistance, relocation assistance, and income support for workers in training.
Services are delivered through local One-Stop Centers.

Program Costs

Lower spending for dislocated worker programs in FY 2001 could increase
in FY 2002 as workers unemployed with the downturn in the economy exhaust their
unemployment benefits and become more proactive in seeking training as a means
to new employment.

DOL Challenges for the Future

Akey Secretarial area of emphasis is re-orienting the Departments
programs to meet the needs of the 21st Century workforce and ensuring
effective, results oriented job-training programs. Adult and dislocated worker
programs will be challenged to provide universally high quality service, high
performance results and consumer choice to citizens who vary greatly in the mix
and intensity of services they require. These programs will also be challenged
to achieve the responsiveness needed to adjust quickly to sudden changes in the
economy triggered by economic "shocks," such as those that followed the
September 11th terrorist attacks, and the unforeseen demand for new skills that
was associated with employment growth in the information technology industries
over the last decade. Customized training and on-the-job training may become
increasingly important components of strategies to improve the programs
flexibility to respond to rapid economic changes.

JOBS FOR DISLOCATED WORKERS

Of those registered under the WIA dislocated worker program, 71% will
be employed in the first quarter after program exit, and 82% of those employed
in the first quarter after program exit will be employed in the third quarter
after program exit, with 90% of pre-dislocation earnings.

Results: The Department met its goal. The program achieved an
entered employment rate of 75 percent, a six-month retention rate of 83 percent
and an earnings replacement rate of 95 percent. Final data will be available
after all States submit their annual reports to the Department. That data will
contain an additional quarter of wage records, so results are expected to vary
from this report.

Program Description: The dislocated worker program aims to
improve the quality of the workforce, reduce welfare dependence and enhance the
productivity and competitiveness of the nations economy. The Workforce
Investment Act (WIA) authorizes employment and training assistance to eligible
dislocated workers. The Department allocates 80 percent of the funds by formula
to the States. The Secretary may use the remaining 20 percent for discretionary
activities specified in WIA, including assistance to localities that suffer
plant closings, mass layoffs or job losses due to natural disasters.

Analysis of Results: According to preliminary results, the
Department exceeded the Program Year 2000 performance targets, which DOL
developed through negotiations with the State agencies. The results reflect
performance that 53 States reported.

States and local areas used the Unemployment Insurance wage record
reporting system for the first time this year as their performance reporting
data source. The Department plans to examine the States reports and the
UI wage record reporting system to identify any issues that may affect data
quality and reliability

Strategies: DOL introduced the following major strategies to
improve the WIA dislocated worker program after its first year of full
operation:

The Department conducted "WIA Readiness Reviews," which uncovered
several areas that affect the delivery of quality services to dislocated
workers and the accurate and reliable reporting of both services and outcomes.
For example, the review results indicate that: a) eligibility determination
policies varied among and within States; b) the number of eligible training
providers was less than what would be necessary for competition and customer
choice  primary tenets of WIA; and c) using the flexibility afforded
them, States had adopted inconsistent approaches to certain measures of
dislocated worker services, affecting the comparability of data.

The Department designed guidance and technical assistance activities
to address the problems that the "WIA Readiness Reviews" revealed occurred in
the first year of program implementation. States and local service providers
use the guidance and technical assistance to improve services and outcomes for
individuals the WIA dislocated worker program serves.

DOL began deploying the guidance it developed as a result of the
"WIA Readiness Reviews." The Department is working with a

network of partners from business coalitions, public interest groups,
and community and faith based organizations to implement the WIA program
refinements for their respective constituents. This will assure more consistent
policy, which will improve service delivery, outcomes and reporting. DOL will
assess its success in deploying the guidance during the second half of Program
Year 2001.

The Department began "showcasing" the best WIA programs. The
Workforce Excellence Network (which consists of the Departments of Education,
Health and Human Services and Labor, the National Association of Workforce
Boards, the National Leadership Institute and other organizations) conducts two
major national conferences each year  the "Journey to Excellence" and
"Workforce Innovation"  to display programs and innovations. In "Journey
to Excellence," State and local service provider staff members who have
achieved excellent results provide workshops to other State and local program
staff. "Workforce Innovation" showcases projects with technological innovations
that have improved employment and training services for dislocated workers and
other WIA customers.

For Program Year 2001, the Department is building upon these basic
strategies by continuing readiness reviews, providing additional training and
technical assistance in response to readiness review findings, and working with
its partners to improve services and outcomes for all citizens. One of the
partners, the Workforce Excellence Network, will showcase models that
demonstrate outstanding customer service, satisfaction and employment outcomes.

The Department also will examine the wage replacement measure for
dislocated workers during Program Year 2001. Specifically, the Department will
focus on better understanding how personal and economic factors affect the
importance of wage replacement for the individual participant. This effort will
provide DOL with valuable insight and information that will inform Departmental
policies and directives and assist localities in improving wage replacement for
dislocated workers.

Goal Assessment and Future Plans:

The Department has increased the Program Year 2002 performance goal to
take into account the Program Year 2000 performance results. The Department set
performance goals for Program Years 2000, 2001 and 2002 during the transition
from the Job Training Partnership Act program to the WIA program. DOL revised
the Program Year 2002 target of 75 percent employment, 85 percent retention in
employment, and 92 percent earnings replacement rate to a target of 78 percent,
88 percent, and 98 percent, respectively.

(Goal 2.3A  FY 2000 Annual Performance Plan)

HELP TRADE-AFFECTED WORKERS FIND NEW JOBS

Upon exit from the Trade Adjustment Assistance (TAA) or NAFTA
Transitional Adjustment Assistance (NAFTA-TAA) programs, 73% of
program exiters will be reemployed in the first quarter after
exit, with 80% of those still employed in the third quarter after
exit and with an average of 82% of pre-dislocation wages.

Results: The Department substantially met the goal, according to
preliminary data covering the first three quarters of FY 2001. Sixty-six
percent of participants were employed in the first quarter after program exit,
and 90 percent of those were still employed in the third quarter after program
exit with an average of 88 percent of pre-dislocation wages.

Program Description: DOL's TAA program provides readjustment
services to dislocated workers who lose their jobs in important part because of
increased imports from any foreign country. DOLs NAFTA-TAA program
provides readjustment services to dislocated workers who lose their jobs in
part because of increased U.S. imports from, or because of a shift of
production to, Canada or Mexico. The readjustment services and benefits offered
by both programs include occupational, on-the-job and remedial training, job
search and relocation assistance, and income support for workers in training.

Analysis of Results: The Departments current data cover the
first three quarters of FY 2001 and represent reports from 43 States under the
revised Trade Act Participant Report (TAPR) system upon which the performance
measures are based.

Preliminary results for program participants employed in the first
quarter after exit are slightly lower than the 73 percent target. The
Department notes the shortfall in employment for those exiting the program as
well as the apparent decline in the percent of wage replacement from that of FY
2000 (from 106 percent replacement to 88 percent) but believes that, without
final data, it is too early to assess the potential causes for these levels of
performance.

Apreliminary reading suggests that some of the shortfall in this
years performance could be due to the overall performance of the U.S.
economy in general, or the fact that in some trade-impacted communities
unemployment rates can soar to levels of 10 to 26 percent. (See General
Accounting Office (GAO) report entitled "Trade Adjustment Assistance:
Experiences of Six Trade-Impacted Communities" in which the
GAO noted the challenges for selected trade-impacted communities which could
not be met by existing trade assistance programs.) The lower results could also
be due in part to the lower reemployment rate of those participants who did not
enter or complete a training program. This is consistent with recent findings
of the DOL Office of Inspector General (OIG) that, although over 90 percent of
TAA participants received some training, only about half of the approximately 9
percent of TAA participants who received no training became reemployed and only
68 percent of those who failed to complete training got jobs compared to 77
percent of training completers who got jobs. The OIG report is complimentary
about the fact that over 90 percent of participants in this audit received some
training as compared to just over 50 percent in a prior study.

Strategies: In FY 2001, the Trade Act Programs strategies
focused on implementing the new TAPR system to support performance management
and on providing technical assistance and training to strengthen program
administration. DOL also continued to identify ways to fully integrate
dislocated worker services that the Trade Program authorizes with the system of
dislocated worker services that the Workforce Investment Act (WIA) authorizes.
In the future, the Department will continue to provide ongoing technical
assistance to States facing reporting problems as well as providing appropriate
training on all aspects of the administration of the Trade Act programs,
especially cooperation with the WIA dislocated worker program, through
conferences it sponsors nationwide. A review of final data as well as the
outcome of pending legislation to reauthorize the Trade Program will shape the
programs other FY 2002 strategies.

Goal Assessment and Future Plans:

The Administration supports TAA Program reauthorization and is currently
developing additional provisions that will enhance the programs
dislocated worker services. The Department will adjust its goals and strategies
accordingly to reflect any new provisions.

Program Evaluation: GAO completed its review of the TAA and
NAFTA-TAAprograms. Its report,

"Trends, Outcomes, and Management Issues in Trade Act
Programs," has the following recommendations for DOL:

Establish an effective performance measurement system to track
participant outcomes and then disseminate that information to the States and
localities so that they can better serve participants;

Establish procedures that will enable the Department to certify
workers for TAA and NAFTA-TAA within required time frames; and

Establish more effective internal controls and improve oversight
with regard to benefit payments by States in order to prevent workers
ineligible for benefits from receiving them.

The Department has implemented an improved reporting system that uses
performance indicators and definitions consistent with those of WIA and uses
Unemployment Insurance wage records (less costly and more consistently
reliable) as the basis for reporting employment, earnings and retention. It has
put new procedures in place and has hired contractor staff to assist in
completing investigations in a timely manner. DOL has also collected
information and corrections on benefit data from 28 of 31 States. In all cases,
States made reporting errors, but did not pay benefits to ineligible workers.

OIG completed its review of the TAA and NAFTA-TAA programs in FY 2001.
Its report, "Improving Trade Act Programs," has the following
recommendations for DOL:

Ensure that States have suitable employment goals translated down to
the local level of program services;

Ensure that States have clear, uniform procedures for program
termination;

Ensure that States trade adjustment activities are an integral
part of their program evaluation and monitoring systems; and

Ensure that the Department and the States monitor participant data in
the new TAA reporting system to ensure the data are accurate and complete.

The Department agrees with the OIG recommendations and has already made
program improvements that address the OIG concerns. DOL has refined its
performance measures and goals, and it will continue to work closely with
States to ensure local offices are better aware of performance expectations.
Ongoing training sessions and forthcoming directives will emphasize to State
and local office Trade Act staff the importance of managing for performance and
outcomes for participants, rather than simply for process. DOLs revised
Trade Act Participant Report system and new program review guide will further
the implementation of the OIG recommendations.